SC says Vodafone to deposit Rs 2500 cr in tax case with in three weeks

November, 15th 2010

The Supreme Court on Monday directed Vodafone to deposit Rs 2500 crore ($550 million) within three weeks in relation to the $2.5 billion tax dispute, a Vodafone spokesman said. The Supreme Court has also fixed Feb 05 as final date of hearing.

Vodafone has also been directed to make a bank guarantee worth Rs 8500 crore ($1.9 billion) within eight weeks, the official said.

Vodafone, fighting a tax bill in India over its 2007 purchase of Hutchison Whampoa Ltd's mobile business in the country, had appealed to the Supreme Court challenging a lower court order that Indian tax authorities had jurisdiction over tax bills in cross-border deals.

The tax office asked Vodafone to pay Rs 11,218 crore ($2.53 billion) within 30 days, but the British firm said it "strongly disagrees" with the calculation.

Meanwhile, The Netherlands has now written to India asking it to consider an alternate dispute resolution that will run parallel to the ongoing court process through what is termed as a Mutual Agreement Procedure (MAP), a government official aware of the development said.

India would examine the request and take a decision in accordance with the provisions of the India-Netherlands double tax avoidance agreement (DTAA), this official added.

MAP is an alternate process of dispute resolution, and is an option available to a taxpayer in addition to and concurrent with the appellate process. However, under MAP, once the proceedings are initiated, it is possible to obtain a stay on the tax demand provided one gives a bank guarantee.

This opens up the possibility of a settlement on the lines of what Vodafone clinched in the UK earlier this year, when it agreed to pay 1.25 billion in taxes to settle a decade-long dispute dating back to 2000 regarding its Luxembourg subsidiary.